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Rising Drug Prices: How Health Plans are Fighting Back

As Americans, we pay 13% more for prescription drugs each year.  And 70% of us take at least 1 drug. That means you may have employees who struggle with paying for their medications.

Health plans are taking action. Some are working directly with doctors, hospitals, and national groups to cut costs while keeping high-quality standards.

Make sure that your health plan includes prescription benefits. Ensuring that your employees can afford their medications can improve employee productivity — and reduce your company’s health plan costs.

7 steps health plans can take to help reduce drug costs for members

Some health plans are attempting to ease the pain in many ways:

  • Low-cost generics
    According to a study by the Texas Association of Health Plans, using generic drugs reduces prescription costs by 10%. Plans typically charge less for generics than brand-name drugs. But generics are just as effective. And in some cases, there may be no cost to the member at all.
  • Tiered formularies
    Health plans typically charge different copays for drugs on different tiers. In most cases, a lower tier means lower out-of-pocket cost for members. And the tier status of drugs is determined by their safety, effectiveness, and cost compared to other similar medicines. So generics, for instance, usually have the lowest copays and are sometimes 100% covered. Special drugs that treat complex illnesses may have higher copays. The TAHP study found that charging for drugs based on a tiered system can reduce overall costs by 17%.
  • Mail-order pharmacy
    Some health plans include mail-order pharmacies to help reduce overall drug costs. Members can order 90-day supplies of maintenance medicines — usually for a discounted copay.
  • Specialty pharmacies
    In some cases, when health insurance companies team up with specialty pharmacies, TAHP found it can reduce costs by 10%. Pharmacies offer discounts on traditionally more expensive medicines to earn the health plan’s business in this category. These drugs are typically used for chronic, serious, or complex illnesses.
  • Step therapy
    Step therapy encourages the use of the most cost-effective drugs first. More costly or risky medicines are then only covered if the first-line medicines don’t work or the patient can’t take them. This helps to control costs while providing medicines that are safe and effective.
  • Smart prior authorizations
    These automate the approval of members’ targeted drugs as long as certain criteria are met. It reduces administrative loopholes and maximizes efficiency. It ensures the member gets the right drugs for their condition. Then more expensive drugs are used only when they’re needed.
  • Quantity management
    Health plans review drug quantities to make sure doses are both safe and effective for the condition being treated. Limits can also prevent overuse, misuse, or abuse of certain medicines.


High prescription prices affect your employees every day

Most of your employees are taking prescription drugs.

In fact, 7 out of 10 Americans take at least one prescribed drug, according to a 2013 Mayo Clinic study. And almost 20% take 5 or more.

A Reuters study found that 4 of the top 10 drugs more than doubled in cost since 2011. For example, the cost of Humira, a drug used to treat arthritis, increased 126%.

Many of these medicines treat chronic conditions. So these costs recur over years and even decades. And this can compound the effects of high prices.

The end result: most people are affected by the high-cost of drugs. And medicines for more serious conditions are causing even bigger problems.


Specialty drugs are the top culprits

These drugs treat serious or chronic diseases like cancer, rheumatoid arthritis, and multiple sclerosis. Many times they require special handling, like refrigeration. And they usually need to be injected or infused. These drugs could cost more than $600 per script, according to the 2015 Milliman Medical Index report.

The report claims that they make up about 1% of all prescriptions but account for about 17% of all prescription spending.

Cancer drugs causing a financial crisis

A study published in JAMA Oncology shows that in 2014 the average monthly cost of some new cancer drugs was over $11,000. That’s up from $1,900 in 2000—a 579% increase!

It’s no wonder why cancer patients are 2.5x more likely to go bankrupt than non-cancer patients.


Many factors drive the high costs

According to a 2012 Mayo Clinic report, there are a few reasons why drug costs are high, especially for complex specialty drugs.


Prescription drug costs aren’t coming down any time soon. But health plans are working hard to maximize each and every dollar spent on medicine.

So it’s critical to know how your company’s benefits can help reduce those costs. And ease the burden on your employees’ wallets and your company’s bottom line.